Political connections and organisational performance: evidence from Pakistan

Abstract

Purpose

This paper aims to investigate the association between political connections (PCs) and organisational performance in a South Asian country, Pakistan.

Design/methodology/approach

Data were collected for 250 non-financial organisations listed on the Karachi Stock Exchange of Pakistan. Multiple linear regression analysis was used to empirically test the research question.

Findings

PCs in Pakistan are common across all industries. The study found a significantly negative effect of PCs on organisational performance, measured in terms of return on assets and return on equity. In addition, negative association of PCs with organisational performance is more pronounced for organisations having connections with politicians, compared to those having connections with former government officials.

Originality/value

The study extends the PCs literature by providing evidence of the impact of PCs on organisational performance in a South Asian country. Several implications for organisations, banks, accounting professionals and policy-makers are provided.

Citation

Cheema, M.U., Munir, R. and Su, S. (2016), "Political connections and organisational performance: evidence from Pakistan", International Journal of Accounting & Information Management, Vol. 24 No. 4, pp. 321-338. https://doi.org/10.1108/IJAIM-05-2016-0053